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from The Edgy Optimist:

I think we’re turning Japanese, I really hope so

Why the U.S. would be lucky to become Japan.

By Zachary Karabell

Over the past few years, it’s become ever more common to hear comparisons between the United States and Japan. They are not favorable. They come in the form of dark warnings that the current policies of the United States will lead to a fate similar to Japan’s over the past 20 years: stagnant growth with no end in site.

Let’s just say for the moment that the United States is becoming Japan – a nation of little to no economic growth, high public debt and a broken financial system. How bad is that? Is becoming Japan really a worst-case scenario?

The past 20 years for Japan have been called the lost decades. Government debt is in excess of 200 percent of GDP. The country has suffered from chronic deflation, a sluggish job market, an aging population, an insular culture and growth stalled at between 1 percent and 2 percent a year. Governments have come and gone. What’s most notable is that until recently, Japan has rarely been at the forefront of economic news the way it was in the 1980s and 1990s, even though it is the world’s third-largest economy and one of its wealthiest. If you factor in deflation, Japan hasn’t just seen tepid growth; it has seen none: Nominal economic output has barely budged since 1992.

Now we look at the United States and see…mounting government debt burdens, deflation, slow growth, a blech labor market and political sclerosis. And that does sound awfully Japan-like.

from Breakingviews:

Next BOJ chief should accept monetisation

By Andy Mukherjee

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The Bank of Japan has a morbid fear of directly financing fiscal deficits. But this “no monetisation” creed sits ill with the $1 trillion or so of public debt - roughly a fifth of the Japanese GDP and about 14 percent of the net outstanding public debt - which it has already turned into money. The next BOJ governor, who will take over when the incumbent Masaaki Shirakawa steps down on March 19, should be more realistic.

from Breakingviews:

Japan tensions rewrite China shopping lists

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By Katrina Hamlin

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

China’s buying habits have taken on an air of the patriotic, at least where Japan is concerned. As tensions rose last year over who owns a group of remote islands, sales of Japanese cars and arrivals of Chinese tourists showed a marked slowdown. Even Chinese acquisitions of Japanese companies fell in the last quarter of 2012.

from Breakingviews:

G7 only adds to global currency confusion

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By Edward Hadas
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The G7 has spoken about the troubled foreign exchange markets, and the world is marginally less secure for it. In Tuesday’s four-sentence statement, the finance ministers and central bankers of the world’s leading economies managed to ignore the problem of inadvertent competitive devaluations, contradict themselves and make an empty promise.

from Breakingviews:

Interview questions for the new BOJ chief

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By Andy Mukherjee

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Japanese Prime Minister Shinzo Abe’s war on deflation will soon have a new general. A hard-charging Bank of Japan governor with strong conviction and oodles of savvy could help bring Abe’s plan to fruition.

from MacroScope:

A statement of non-intent

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The flurry of activity about a G7 currency statement yesterday can now be put in perspective. It will almost certainly happen but it’s very much going through the motions.

We’ve been saying for a while that having urged it to reflate its economy for some time, Japan’s partners could hardly complain now that it is. Lael Brainard of the U.S. Treasury basically let that cat out of the bag last night, warning against competitive devaluations but saying that Washington supported Tokyo’s efforts to reinvigorate growth and end deflation.

from Felix Salmon:

When the finance minister targets stock prices

Japan's economy has been far too stagnant for far too long: everybody can agree on that. The aging population, now used to deflation, prefers saving to spending -- an entirely reasonable stance if prices will be lower tomorrow than they are today. So the government has long been facing a very tough task: to change the psychology of a nation, basically. You can't do that -- as Japan learned the hard way -- with old-fashioned public-works spending. Instead, you have to target expectations.

The Bank of Japan started on this road last month, formally adopting a 2% inflation target. That was the BoJ's way of saying "start spending now, because your yen won't be worth as much tomorrow as they are today". And now the finance minister is doing his part to get the party started as well, in a highly unorthodox manner. In a speech on Saturday, he said that he wants to see the Japanese stock market rise 17% to 13,000 by the end of March.

from MacroScope:

Currency chatter

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With the rhetoric getting more heated, the three-year market fixation on bond yields could well be supplanted by currencies in the months ahead.

This week, everything points towards the first meeting this year of G20 finance ministers and central bankers in Moscow on Friday and Saturday. We’ve already got a clear steer from sources that even though France wants the strong euro on the agenda there will be little pressure put on Japan and others whose policies are pushing their currencies lower. Having urged Tokyo to reflate its economy last year, its G20 peers can hardly complain now that it has. That is not to say there won’t be lots of words on the issue though.

from Breakingviews:

Tokyo stocks: this time could really be different

By Robert Cole

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

Once bitten, twice shy. In fact, investors in Japan have been bitten many times by the seductive notion that the land of the rising sun is emerging from its bear-market night. They would be forgiven for shying away this time.

from Breakingviews:

Equity split from commodities may be short lived

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By Ian Campbell
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The often close correlation between equity and commodity prices has faded. World equities are up 15 percent since August while commodities have barely moved. Is this a paradigm shift? Probably not, though shale gas is rattling energy markets. Equities may simply have run too fast on the back of quantitative easing while commodity investors have hesitated over global growth worries.

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